Exxon Mobil’s (XOM) internal forecasts on oil prices reportedly grew bearish recently as the energy giant cuts jobs and capital spending to protect its dividend. Exxon stock fell.
In September, Exxon lowered its oil price expectations by 11% to 17% for the next seven years, according to a Wall Street Journal report. It now sees Brent oil prices between $50 and $55 per barrel for the next five years before hitting $60 in 2026 and 2027.
Oil prices have remained in $40-to-$49-per-barrel range as Covid-19 lockdowns hit global demand. U.S. oil prices even went negative in April. On Wednesday, U.S. crude futures were around $45 a barrel with Brent at $48.
Exxon doesn’t publish its oil price expectations but has been positive about the long-term outlook for its business in public. During the Q3 earnings call, Exxon officials said the company wasn’t canceling any projects that were in execution or in the funding process.
“We remain confident in our long-term strategy and the fundamentals of our business, and are taking the necessary actions to preserve value while protecting the balance sheet and dividend,” CEO Darren Woods said in the earnings statement.
To keep investors happy, Exxon is maintaining its quarterly dividend at 87 cents a share. But to protect its payout, the company is cutting spending and jobs. Exxon sees 2021 capital program at $16 billion-$19 billion, down from the 2020 target of $23 billion. And it plans to eliminate about 14,000 positions.
Analysts have questioned the sustainability of the Exxon stock dividend as increased borrowing is necessary to support it.
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Exxon Stock Down Despite Oil Prices
U.S. rival Chevron (CVX) also doesn’t release oil price projections. But BP (BP) sees Brent oil prices around $55 per barrel until 2025 and Royal Dutch Shell (RDSA) sees long-term crude prices at $60 a barrel.
A Covid-19 vaccine isn’t expected to be a silver bullet for the energy industry as the demand impact should linger while governments push for greener energy sources.
In an October report, OPEC said it sees global oil demand rising by 10 million barrels per day over the next 40 years. That’s 1 million bpd lower than projected in its 2019 outlook.
Exxon stock fell 2.5% on the stock market today even as oil prices rose. Chevron was down 2.5%, BP fell 2.7% and Shell lost 3.4%.
Follow Gillian Rich on Twitter @IBD_GRich for energy news and more.
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